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Incoterms (International Commercial Terms) 2010

Incoterms are standard trade definitions (such as ex-works, FOB and CIF) which are widely used in international contracts. The Incoterms have been developed by the International Chamber of Commerce and indicates the obligations and risks for both the buyer and the seller. There are eleven Incoterms: EXW Exworks means that the seller delivers when he places the goods at the disposal of the buyer at the sellers premises or another named place (i.e. works, factory, warehouse, etc) not cleared for export and not loaded on any collecting vehicle. This term thus represents the minimum obligation for the seller, and the buyer has to bear all costs and risks involved in taking the goods from the sellers premises. Critical Points

Carriage to be arranged by the buyer Risk transfer from the seller to the buyer when the goods are at the disposal of the buyer Cost transfer from the seller to the buyer when the goods are at the disposal of the buyer

FOB Free on Board means that the seller delivers when the goods pass the ships rails at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point. The FOB terms requires the seller to clear the goods for export. Critical Points

Carriage to be arranged by the buyer Risk transfer from the seller to the buyer when the goods pass the ships rail Cost transfer from the seller to the buyer when the goods pass the ships rail

CIF Cost Insurance and Freight means that the seller delivers when the goods pass the ships rail in the port of shipment.

The seller must pay the costs and freight necessary to bring the goods to the named port of destination but the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer. However, in CIF the seller also has to procure marine cargo insurance against the buyers risk of loss of or damage to the goods during the carriage. Consequently, the seller contracts for insurance and pays the insurance premium. The CIF term, requires the seller to clear the goods for export. Critical Points

Carriage and insurance to be arranged by the seller Risk transfer from the seller to the buyer when the goods pass the ships rail Cost transfer at port of destination, buyer paying such costs as are not for the sellers account under the contract of carriage

CA Free Carrier means that the seller delivers the goods cleared for export, to the carrier nominated by the buyer at the named place. It should be noted that the chosen place of delivery has an impact on the obligations of loading and unloading the goods at that place. If delivery occurs at the sellers premises, the seller is responsible for loading. If delivery occurs at any other place, the seller is not responsible for unloading. Critical Points

Carriage to be arranged by the buyer or by the seller on the buyers behalf Risk transfer from the seller to the buyer when the goods have been delivered to the carrier at the named place Cost transfer from the seller to the buyer when the goods have been delivered to the carrier at the named place

CFR Cost and Freight means that the seller delivers when the goods pass the ships rail in the port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination but the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer. The CFR term requires the seller to clear the goods for export.

Critical Points

Carriage to be arranged by seller

Risk transfer from the seller to the buyer when the goods pass the ships rail Cost transfer at port destination, buyer paying such costs as are not for the sellers account under the contract of carriage

DDP Delivered duty paid means that the seller delivers the goods to the buyer, cleared for import, and not unloaded from any arriving means of transport at the named port of destination. The seller has to bear all the costs and risks involved in bringing the goods thereto including, where applicable, any duty for import in the country of destination. Whilst the Exworks term represents the minimum obligation for the seller, DDP represents the maximum obligation.

Critical Points

Carriage to be arranged by the seller Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer

FAS Free Alongside Ship means that the seller delivers when the goods are placed alongside the vessel at the named port of shipment. This means that the buyer has to bear all cost and risks of loss of or damage to the goods from that moment. The FAS term requires the seller to clear the goods for export. Critical Points

Carriage to be arranged by the buyer Risk transfer from the seller to the buyer when the goods have been alongside the ship Cost transfer from the seller to the buyer when the goods have been placed alongside the ship

CPT Carriage Paid To means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. This means that the buyer bears all risks and any other costs occurring after the goods have so delivered. The CPT terms requires the seller to clear the goods for export.

Critical Points

Carriage to be arranged by the seller Risk transfer from the seller to the buyer when the goods have been delivered to the carrier Cost transfer at the port of destination, buyer paying such costs as are not for the sellers account under the contract of carriage

CIP Carriage and Insurance Paid To means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. This means that the buyer bears all risk and any additional costs occurring after the goods have been so delivered. However, in CIP the seller also has to procure insurance against the buyers risk of loss of or damage to the goods during the carriage. Consequently, the seller contracts for insurance and pays the insurance premium.

Critical Points

Carriage and insurance to be arranged by the seller Risk transfer from the seller to the buyer when the goods have been delivered to the carrier Cost transfer at place of destination, the buyer paying such costs as are not for the sellers account under the contact of carriage

DAT Delivered At Terminal means that the seller delivers when the goods, once unloaded from the arriving means of a transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. The parties are well advised to specify as clearly as possible the 'terminal'.

Critical Points Carriage to be arranged by the seller Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer. Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer.

DAP Delivered At Placel means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place.

Critical Points Carriage to be arranged by the seller Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer. Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer.

Incoterms Export Costs Import Costs EXW FCA FAS FOB CFR CIF CPT CIP DAT DAP DDP S = Seller B = Buyer B S B S S S S S S S S B B B B B B B B B B S Insurance (B) B B B S S S S S S S Place of Delivery Sellers Works; at buyers disposal Place of departure custody of the carrier Alongside ship in port of shipment On board the ship in port of shipment On board the ship in port of shipment On board the ship in port of shipment Place of departure; custody of the 1st carrier Place of departure; custody of the 1st carrier Place of destination at the terminal; at buyers disposal Place of destination at the terminal; at buyers disposal Place of destination; at buyers disposal